By: Coleman Jackson, Attorney, Certified Public Accountant
May 16, 2019
The United States Treasury has collaborated with over seventy countries to enforce the Foreign Tax Compliance Act (FATCA) which became U.S. tax law in 2010. FATCA in a nutshell requires Specified Individuals with foreign assets over a certain threshold amount to report those foreign assets annually on their federal tax returns filed with the Internal Revenue Service. The U.S. government has developed two model intergovernmental agreements (IGAs) to implement FATCA. By the end of 2017, countries; such as, Australia, Belgium, Bermuda, Brazil Canada, Colombia, Czech Republic, Denmark, Finland, Guernsey, Iceland, Ireland, Isle of Man, Italy, Jersey, Latvia, Lithuania, Luxembourg, Malta, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Republic of Korea, Slovakia, South Africa, Spain, Sweden and United Kingdom had negotiated and signed an IGA. By the end of last year, another 12 to 15 other countries; such as: Austria, Hungary, Estonia, Croatia, Japan, and Cayman Island had reached some form of cooperation agreement with the U.S. Treasury to enforce FATCA. Intergovernmental Agreements between the United States and several additional foreign governments are in various stages of negotiation or completion today.
The Intergovernmental Agreements’ purpose is to detect U.S. Persons using foreign assets to evade U.S. tax laws. The IGA’s are designed to require all foreign financial institutions (FFIs) within the jurisdiction of a partner government to identify and report U.S. accounts to the proper authority. The property authorities could possibly require the FFI to direct report to the Internal Revenue Service or the operative IGA would require that the FFI indirectly report to the IRS through some form of in-country reporting agency or mechanism. The details of how the disclosures are to be made depend upon the negotiated IGA between a particular country and the U.S. Treasury. The important point is that identity of U.S. persons subject to FATCA reporting requirements will surely be discovered under the global collaborative Intergovernmental Agreements (IGAs) that are being put in force to implement the Foreign Tax Compliance Act.
This law blog is written by the Taxation | Litigation | Immigration Law Firm of Coleman Jackson, P.C. for educational purposes; it does not create an attorney-client relationship between this law firm and its reader. You should consult with legal counsel in your geographical area with respect to any legal issues impacting you, your family or business.
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